THIRUVANANTHAPURAM: Kerala’s industrial output is still below pre-lockdown levels, weighed down by a struggling manufacturing sector, a report released by the Department of Economics and Statistics has revealed.
The manufacturing sector recorded a negative growth of 17.84% in 2022-23 compared to 2019-20, showed the ‘Report on Index of Industrial Production (IIP) 2015-16 to 2022-23’ released recently.
According to experts, poor credit disbursement to micro, small and medium enterprises (MSMEs) and high employee turnover could also be reasons for the sector’s decline.
The IIP is a vital indicator of industrial performance and economic situation. The general or composite IIP is calculated on the basis of the performance of three industry groups - ‘manufacturing’, ‘mining and quarrying’, and ‘electricity’.
An analysis of the report said Kerala’s composite IIP for 2022-23 was 96.94, which was 5.38% less than the IIP of 102.45 in 2019-20.
While individual IIPs for ‘mining and quarrying’ and ‘electricity’ rose by 14.96% and 49.13%, respectively, in 2022-23 when compared to the pre-lockdown year, the increase couldn’t help in bumping up the composite IIP due to the drastic decline in manufacturing sector.
“Kerala’s manufacturing sector is dominated by traditional industries dealing with food processing, rubber and plastic products, which contribute to 30% of the total output. These industries are labour-intensive and consist of MSMEs. The pandemic had a disproportionate impact on small and medium firms,” said Kiran Kumar Kakarlapudi, assistant professor at Gulati Institute of Finance and Taxation, Thiruvan-anthapuram.
Production, manufacturing index highest in 2018-19
“The MSMEs did not get substantial credit to recover from the pandemic shock. The Reserve Bank of India data shows credit disbursement to small firms was low. Constrained by financial resources, and the labour force joining other modern sectors for want of better wages affected the recovery of the manufacturing sector,” Kiran said.
Between 2015-16 and 2022-23, the highest production was recorded in 2018-19, when the composite IIP stood at 114.63. Manufacturing too recorded the highest index, 136.43, that fiscal year.
While the lockdown disrupted the manufacturing sector, the other two industry groups recorded robust growth. In the lockdown year of 2020-21, the IIP for manufacturing shrunk by 24.66% from the previous year. However, ‘mining and quarrying’ grew by 18.67% and electricity by 23.14%. Composite IIP of 2020-21 declined by 13.9% due to negative growth of the manufacturing sector.
The year 2021-22 saw the highest output from electricity sector, an IIP of 100.18.
A source with the Kerala State Electricity Board (KSEB) said, “Power stations could be utilised to their maximum in the previous years due to drought and floods during which dam gates had to be raised. In 2021-22, maximum generation was done in the stations before the rain.”
WHAT IS IIP?
IIP (Index of Industrial Production) is a composite indicator that measures short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period. The base period chosen by the Department of Economics and Statistics was 2011-12
REPORT’S OBSERVATIONS
“Signs of improvement and stabilisation are seen across industrial sectors from 2021-22. Manufacturing and mining sectors showed positive growth rates, indicating adaptive strategies and sector specific recoveries. IIP of the manufacturing sector in Kerala was in line with the national pattern in all the eight years,” said the report. It was prepared by Manoj M, additional director, and Abdul Gafoor, assistant director of the Department of Economics and Statistics.